In In re Intervention Energy Holdings, LLC, the question before the United States Bankruptcy Court for the District of Delaware was whether an investor who “bought and paid for [one] Common Unit (including all rights related thereto),”

Recently on June 6, 2016, the Delaware Bankruptcy Court considered a motion to dismiss the Intervention Energy Holdings, LLC, et al. bankruptcy proceeding. On May 20, 2016, Intervention Energy Holding, LLC (“IE Holdings”) and Intervention Energy, LLC (“IE”) filed a voluntary chapter 11 bankruptcy petition in the United States Bankruptcy Court for the District of Delaware (the “Voluntary Petition”).

On June 10, 2016, the Treasury Department (Treasury) and the Internal Revenue Service (the IRS) issued final regulations on the federal income tax treatment of discharge of debt issued by disregarded entities (e.g., single member LLCs) and grantor trusts (e.g., investment trusts). Under the regulations, the exemption of cancellation of debt income of taxpayers that are insolvent or in a Title 11 case (bankruptcy) only applies if the owner of the disregarded entity or grantor trust is insolvent or is a debtor in a bankruptcy case.

The question of what constitutes “equal treatment” is a question as old as law itself. Though a favored topic by the Aristotles and the Rousseaus of the world, the question is not entirely esoteric. The concept plays a central role in the law of bankruptcy – courts occasionally describe the principle of equitable distribution between similarly situated creditors as one of the “pillars” of the Bankruptcy Code.

Section 502(e)(1)(B) of the Bankruptcy Code allows debtors to seek disallowance of certain types of contingent claims to avoid being twice liable on a single obligation. It has the added benefits of facilitating debtors’ efficient exit from bankruptcy and ensuring that unsecured creditors are paid in a timely fashion. Debtors commonly seek Section 502(e)(1)(B) relief for claims involving environmental remediations or tort lawsuits, for example personal injury actions.

In my May 26th post, I raised several questions that unsecured creditors in any Chapter 11 case should know the answers to and take action where appropriate.

In 2015, the Court of Chancery ruled upon the then novel issue under Delaware law as to what priority level advancement claims should be afforded in a receivership action. Then Vice Chancellor Parsons held that claims for advancement are not entitled to administrative priority, and instead are considered to be pre-petition, non-priority unsecured claims. For a link to a summary of the Court of Chancery decision, click here.

The Bankruptcy Judges and Chapter 13 Trustees for the United States Bankruptcy Court for the Southern District of Ohio have reviewed and approved a proposed District Wide Mandatory Form Chapter 13 Plan and proposed form Order Confirming Chapter 13 Plan and Awarding Attorney Fees. Currently, the Dayton, Cincinnati, and Columbus Bankruptcy Courts use different Chapter 13 form plans. The use of these different form plans makes it difficult for practitioners and creditors to keep track of the particular requirements for each court location.

A recent decision out of a New Jersey Bankruptcy Court highlights a loophole in the Bankruptcy Code which may allow Chapter 7 debtors to keep significant assets out of the hands of trustees and creditors.

Chapter 15 of the U.S. Bankruptcy Code, 11 U.S.C. §§ 1501 et seq., provides the legal framework by which U.S. bankruptcy courts recognize foreign insolvency proceedings of companies that have assets and operations in more than one country. Congress added Chapter 15 to the Bankruptcy Code with the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Like any new law, the application and limits of Chapter 15 are developing through jurisprudence.